The stock market fell today as the auto bailout continues to stall in the Senate. However, one reason the market may have fallen further late in the afternoon was JP Morgan CEO James Dimon's comments regarding 4th quarter profitability at the bank. He indicated that it has been a lousy quarter so far, and December has been particularly bad.
No matter the reason, traders and investors sold stocks today. We are now in a position where the market is in an area of support, and it is important that it holds at these levels and has a strong upside day either Friday or Monday.
All of the major averages now have an inverted head and shoulders pattern in place. This is actually a more ominous sign in that it can act as a powerful continuation pattern in the context of the existing trend if the right shoulder is broken to the downside on these charts. In the S&P 500, the 815 level is the low of the right shoulder. In the Nasdaq, this level is just below 1400.
In my view, this pattern as a continuation pattern is more powerful than at a bottoming pattern, so watch it!
Scott Cole
www.bestdaytradingstocks.com
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